Data warehousing (DW) appliances aren’t the only hardware appliances shaking up the industry. New on the scene are business intelligence (BI) appliances, which also have the potential to change the status quo.

In “Data warehousing appliances: Are they market breakers?” we discussed the dramatic changes these products could have on the market by:

1. Displacing existing DW database and server combinations.
2. Expanding the overall DW market.
3. Forcing existing vendors to react in terms of how the hardware and software are bundled and priced.

Since that article was published, there have been two big changes in the marketplace: renewed competitive pressures and the emergence of business intelligence appliances.

First, the high-end DW market has seen renewed competitive pressures. NCR has announced that Teradata will be spun off as its own company. Although Teradata has been run increasingly independently over the last few years, going public enables it to become more active in the mergers and acquisitions market.

HP revealed its response to Teradata’s offering with its Neoview product and services. It does not appear, however, that the enterprise DW market will be expanded through these moves, since every major corporation probably already has at least one enterprise DW.

But will Teradata and HP Neoview steal major accounts away from Oracle, IBM and Microsoft? Probably not. It’s too costly a migration unless the price is quite low, which leads us to the probable result of these developments: downward pressure on pricing and more intense competition (definitely good for the market).

The second and bigger change in the marketplace is the appearance of business intelligence appliances. Whereas DW appliances have to compete with established data warehouses and database vendors, business intelligence appliances do not face the same competition.

Most people would initially disagree with this statement. After all, there are many BI implementations across large corporations today, and there are several large established BI vendors. But bear in mind that there are important differences between the DW and BI markets. Corporations have many implementations with different BI vendors rather than onestandard database. Most importantly, BI is not really pervasive throughout most corporations today. Because of cost, complexity and dueling products, most business users are either not using BI at all or are using data shadow systems (spreadsheets) to perform their reporting and analysis. This creates a great market opportunity (or void) for the business intelligence appliances to fill.

Celequest and LucidEra are two of the business intelligence appliance vendors in the market today. These vendors offer commodity hardware, some open source software and some proprietary software that improve performance and ease of use. Business intelligence appliances come in pre-configured packages offering ease of installation, simplified operations and anticipated easier maintenance. Using commodity hardware and open source software allows these vendors to aggressively price their offerings and lower the total cost of ownership (TCO).

Another market-disruptive move that the business intelligence vendors are making is embracing Software as a Service (SaaS) as a solution offering. SaaS further lowers the TCO for customers as well as ease of use.

Business intelligence appliances will not likely displace existing business intelligence software vendors. Companies will not drop their existing BI implementations or their BI expertise associated with the major BI vendors. However, business intelligence appliances may be a great replacement for the many data shadow systems that business groups have built throughout these large companies. TDWI published a report in 2004, titled “In Search of a Single Version of Truth: Strategies for Consolidating Analytic Silos,” using data from a survey from that year that revealed that a typical Fortune 1000 company had almost 30 data shadow systems!

In addition, in the SMB (small to medium-sized business) market, where IT resources are limited and budgets constrained, business intelligence appliances, especially through a SaaS-based offering, may be very appealing.

By replacing data shadow systems and offering a solution for tight budgets, business intelligence appliances may actually expand the market. At a minimum, they will create downward pricing pressure and help us recognize that by simplifying BI implementations we can help foster the overall growth of the BI marketplace.